DraftKings & FanDuel Considered for Antitrust Investigation

It's clear to see that DraftKings and FanDuel used their power as Daily Fantasy Sports providers to get a strong foothold in the U.S. online sports betting market. In the five years that these companies have been offering retail & online sports betting services, they have successfully reached the pinnacle as two of the top sports betting operators in the nation.

As the U.S. sports betting market continues to mature, so too does the scrutiny over the community's key players. This is what has led U.S. Senators Mike Lee (R-Utah) and Peter Welch (D-Vermont) to call for the Federal Trade Commission (FTC) and the Department of Justice (DOJ) to initiate antitrust investigations against both companies.

According to a letter sent by Sen. Lee:

DraftKings and FanDuel “expanded their dominance by leveraging their positions in fantasy sports to become online sports betting giants.” It's notable that the letter does not identify instances of when either company has put pressure “on business partners to not work with competitors."

Targeting Sports Wagering

While DraftKings and FanDuel both run online casinos, a majority of their online gambling revenue comes from sports betting. With that being true, it is assumed that the FTC and DOJ will focus any possible investigations on the sports betting community.

It's noteworthy that there could be delays in addressing the activities of these two online gambling operators. That will be largely due to the administration change from the November election. It will take time for new leadership at the FTC and DOJ to get their bearings before moving forward. If investigations do ensue, there will surely be a high antitrust standard set before any meaningful rulings are made. The reality is e-commerce regulations regarding protective competition have not yet been set in stone.

If DraftKings and FanDuel are found to be in violation of antitrust laws, stiff fines will likely be issued. Additionally, each company would likely be required to pare down their online sports betting activities. As far as trying to break up either of these companies, that would be extraordinary and perhaps considered to be a bridge too far.

A Look at Possible Evidence

Michigan is generally considered to be a representative sports betting market. They have a large number of licensed online gambling operators across the sports betting and online casino communities. Using Michigan as a key example of the power DraftKings and Fanduel are wielding, here is a look at the final numbers for October 2024:

• FanDuel was #1 for handle and gross revenue at $222 million and $16 million, respectively


• Draft Kings was #2 in both categories at $160 million and $7 million, respectively


• Combined, both operators accounted for 66% of the state's total handle and 72% of the state's gross revenue
  

With this kind of economic control, there would seem to be reason for antitrust concern. If investigations go forward, it will be up to management at both of these companies to show reasons why they are entitled to such dominance.